I was in my late 20s when first offered a 401(k) retirement plan. I distinctly remember the HR representative telling me I would be wise to start saving for retirement right away. He advised that I would need a good 30-40 years of investing in a 401(k) to have enough money to retire on. Given what I now know about real estate, I suspect I could start late and still make good money.
The one thing all investments have in common is the fact that time is the investor’s friend. The longer you let your money work for you, the more opportunity you need to generate positive returns. More time equals a better overall return under normal circumstances.
The Relatively Safe 401(k)
As for investing in a 401(k) plan, we are typically advised to start as early as possible because the returns are limited. It is not as though we are putting thousands of dollars per week into our accounts. The little amount we can afford to put away takes time to grow. So we need decades to make it count for something.
Because we are taught to start saving for retirement early, people who do not have access to a retirement plan find themselves without an adequate savings vehicle. They may find themselves at 30 or 40 wondering how they are going to retire. And by that time, they might feel like it is too late to get started. It’s never too late. And that brings us back to real estate.
Ways to Invest in Real Estate
There are multiple ways to invest in real estate. If you do not want the risk, there are property funds that work very similar to mutual funds. But returns on such funds will be limited unless you have a tremendous amount of money to invest upfront. The other option is to invest directly. How do you do that? By buying properties.
Actium Partners is a Salt Lake City hard money firm that specializes in commercial real estate. Most of their loans go to investors looking to purchase commercial properties like office buildings, warehouses, strip malls, and the like. Buying and renting out commercial properties is a good way to make money in real estate. But you do have to put quite a bit of cash into it. So if you’re cash poor, there is another option in residential.
Consider Residential Rentals
Residential rentals are another way to make money in real estate. Residential properties are cheaper to come by than their commercial counterparts. If you can come up with 15-20% for a down payment, you can buy that first residential property. Monthly rental income should cover your mortgage as well as the rest of your expenses and some profit.
Some investors don’t start by buying that first house. Instead, they turn their existing homes into rental properties while they buy something smaller and less expensive for themselves. To do this successfully, however, your current home needs to be mortgage-free.
Build One on the Other
The key to making money in real estate is to build one property on top of another. You buy your first property and build equity in it. Then you convert that equity into a down payment for the second property. Over time, multiple properties provide a generous monthly income that can meet your retirement needs.
Best of all, it is never too late to get started. You may be decades late in starting a 401(k) plan, but you can start investing in real estate in your 40s, 50s, or even your 60s.
